UB Bancorp Releases Earnings for the Year Ended December 31, 2020 Reports Record Earnings for the Fourth Quarter of 2020

Rhea-AI Summary

UB Bancorp (OTCQX: UBNC) reported a record net income of $1.9 million, or $0.32 per common share, for Q4 2020, reflecting a rise from $1.8 million in the same period last year. The Company increased its allowance for loan losses by $595,000 amid the pandemic's challenges. Core deposits grew significantly by $119.9 million (19.1%). Total assets reached $987.3 million, a 20.2% increase YoY. The Bank's asset quality remains strong, with non-performing assets at 0.36% of total assets. A cash dividend was paid to shareholders, and share repurchase approval was announced.

Positive

• Record net income of $1.9 million for Q4 2020, up from $1.8 million in Q4 2019.
• Core deposits increased by $119.9 million (19.1%) in 2020.
• Total assets grew to $987.3 million, a 20.2% year-over-year increase.
• Strong asset quality with non-performing assets at 0.36% of total assets.
• Cash dividend paid in December 2020.

Negative

• Increased allowance for loan losses by $595,000 due to pandemic uncertainty.
• Annual net income for 2020 declined to $5.1 million from $7.2 million in 2019.
• Potential future asset quality deterioration due to economic challenges from the pandemic.

UB Bancorp (OTCQX: UBNC) (the “Company”) the parent of Union Bank (the “Bank”) is pleased to report its results for the quarter and twelve months ended December 31, 2020.

Some highlights of the Company’s fourth quarter included:

• The Company earned a record $1.9 million or $0.32 per basic common share during the fourth quarter of 2020
• In December the Board announced their approval to repurchase up to 1.5% of its outstanding common shares
• Provided an additional $595 thousand to our allowance for loan losses during the quarter
• Posted pre-tax, pre-provision earnings of $3.0 million for the quarter, an increase of 19.2% from the $2.5 million of pre-tax, pre-provision earnings for the fourth quarter of 2019 (*)
• Robust core deposit growth continued in the fourth quarter, year-to-date our core deposits have increased $119.9 million or 19.1%, with noninterest bearing deposits increasing $92.7 million or 43.2% during 2020
• Active management of our balance sheet and deposit pricing has allowed us to reduce our cost of funds 13 basis points during the quarter, helping us to support our net interest margin
• Given our core deposit growth, our liquidity position is very strong
• Most customers that received pandemic related loan payment relief are returning to normal payments
• Asset quality metrics remain strong
• Capital levels are solid and remain well above regulatory thresholds to be considered ‘Well Capitalized’
• The semi-annual cash dividend was paid to shareholders in December
• The Company ended the year with 5,987,782 common shares outstanding

Net income for the fourth quarter of 2020 was $1.9 million or $0.32 per basic common share versus $1.8 million or $0.31 per basic common share earned for the same three-month period in 2019. The Company’s return on average assets and average tangible equity for the fourth quarter of 2020 was 0.78% and 10.13%, respectively. The earnings performance for the fourth quarter of 2020 relative to that of the same quarter in 2019 benefited from a much larger earning asset base coupled with a reduction in funding costs outweighing increased provisions for loan losses and lower yields on our earning asset base. Excluding taxes and provisions for loan losses (*) the Company earned $3.0 million during the fourth quarter of 2020 which compares favorably to the $2.5 million of pre-tax pre-provision income earned (*) for the same three-month period in 2019.

Net income for the twelve-month period ended December 31, 2020 was $5.1 million and represented a 0.54% return on average assets and a 7.19% return on average tangible equity. For the full-year of 2019 the Company posted $7.2 million of net income. Excluding taxes and $5.3 million of provisions for loan losses (*), the Company generated $11.4 million of income during 2020. These results were favorable to the $9.9 million of pre-tax pre-provision income (*) for the same twelve-month period one year ago.

Rob Jones, President and Chief Executive Officer, stated, “2020 has been a challenging period to say the least. Absent our aggressive approach to building loan loss reserves due to the pandemic, our operating performance has been outstanding. I am proud of our team for delivering these results during times of significant stress for both our staff and our customers. I am especially proud of our core loan and deposit growth in the 4^th quarter.” Jones continued, “As we enter 2021, we are yet to see direct signals of any systemic COVID related credit deterioration in our loan portfolio. However, we believe that it will take a few more quarters before we can be confident that a COVID related credit storm will not materialize. We are looking forward to helping our communities by participating in a second round of Paycheck Protection Program (“PPP”) lending. We are confident that the recent vaccine announcements will help bring the pandemic to a close and will allow us a return to more normal living and working conditions later this year.”

Revenues have benefited from a larger balance sheet and a higher level of earning assets than the Company had at year end 2019. As of December 31, 2020 the Company had total assets of $987.3 million, an increase of $166.0 million or 20.2%, compared to $821.3 million of total assets on December 31, 2019. Over this same time period gross loans grew $82.7 million or 14.3%, ending the period at $662.8 million. With the task of putting to work funds received from our subordinated note offering, our available-for-sale investment portfolio increased $85.9 million since year end 2019 and totaled $250.0 million on December 31, 2020. This earning asset growth was funded primarily through growth in our core deposit base. Total deposits on December 31, 2020 were $753.4 million compared to $678.2 million on December 31, 2019, an increase of $75.3 million or 11.1%. During this same time period noninterest bearing deposits increased $92.7 million or 43.2% to $307.0 million. While a portion of this growth is due to activity from the PPP, the Bank has actively attracted new deposit customers.

The Bank has been actively working with our borrowers to provide relief during this pandemic. Through December 31, 2020, we had granted COVID related loan payment deferrals on just over 345 loans with an aggerate maximum outstanding balance of approximately $92.5 million. As of year-end 2020 we had 22 loans with balances of approximately $7.9 million, or 1.3% of our loan portfolio (excluding PPP loans) with active payment deferral. We expect most of these loans will return to contractual payments at the end of their deferral period. Included in these numbers as of the end of the fourth quarter were 5 relationships, with outstanding balances of $4.8 million, that had requested additional relief. We had anticipated that as a result of this prolonged pandemic, that some of our customers may face economic challenges. As we continue to work with our borrowers, we anticipate that our asset quality metrics could be negatively impacted in future periods. As a result, we have been adding to our allowance for loan losses due to this pandemic related uncertainty. As of December 31, 2020, our allowance for loan losses totaled $10.1 million and represented 1.53% of total loans outstanding. Furthermore, our allowance relative to our originated loan portfolio (excluding purchased loans), net of PPP loans, stands at 1.86% at the end of the fourth quarter of 2020. We anticipate maintaining our allowance at its current level until we get further clarity on the pandemic’s impact on our borrowers.

Currently our asset quality remains very strong with total non-performing assets representing only 0.36% of total assets as of December 31, 2020. This represents a slight increase from our level at the end of the third quarter of this year due primarily to single relationship, not a systemic trend, that has been negatively impacted by the pandemic. The provisions set aside in prior periods allowed the Bank to provide a specific reserve for this relationship.

We remain focused on lending to high quality borrowers as well as setting aside provisions to support our allowance for loan losses.

Capital levels at our Bank remain strong with total risk-based capital of 14.62%, common equity tier 1 to risk-weighted assets of 12.47%, and the Bank’s tier 1 leverage ratio of 9.31% at quarter-end. Our Bank’s equity position was supported by an injection of $7.25 million of funds during the second quarter from its parent, UB Bancorp.

The Company paid a cash dividend on December 31, 2020, to shareholders of record at the close of business on December 15, 2020. In addition, on December 7^th of 2020 the Board announced their approval to repurchase up to 1.5% of the Company’s outstanding common shares.

UB Bancorp and Union Bank are headquartered in Greenville, North Carolina and operate 14 branches located in 12 counties throughout Eastern and Central North Carolina. UB Bancorp stock is traded on the OTCQX under the symbol UBNC.

This press release includes certain forward-looking statements in reliance on the “safe-harbor” provisions of The Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are subject to a number of risks and uncertainties. Actual results may differ materially from those anticipated in any such forward-looking statements. The Company undertakes no obligation to update or revise any such forward-looking statements. This press release contains financial information determined by methods other than in accordance with GAAP (*). The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance. These measures typically adjust GAAP performance measures to exclude the effects of transactions that are infrequent in nature. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses.

UB Bancorp
Consolidated Balance Sheets
($000's omitted)
				As of the Period Ended
				December 31,
				2020				2019				2018
ASSETS				(un-audited)				*				*
Cash and due from banks			$	11,460			$	9,359			$	9,355
Interest-bearing deposits with banks				17,905				16,867				25,753
Investment securities available-for-sale				249,972				164,040				148,575
Loans - gross				662,770				580,024				513,675
Net fair value marks				(1,807	)			(3,285	)			(5,047	)
Allowance for loan losses				(10,113	)			(4,988	)			(4,046	)
	Net Loans			650,850				571,751				504,582
Bank premises and equipment, net				14,923				18,819				16,793
Bank-owned life insurance				17,350				16,897				16,450
Other real estate owned				118				-				327
Goodwill				12,897				12,897				12,897
Core deposit intangible				694				1,243				1,951
Other assets				11,119				9,448				8,503
		Total Assets	$	987,288			$	821,321			$	745,186
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
	Deposits		$	753,448			$	678,190			$	627,171
	Advances from the Federal Home Loan Bank			46,500				47,000				32,000
	Subordinated debentures			30,633				6,000				6,000
	Other borrowings			57,523				-				-
	Accrued expenses and other liabilities			5,190				4,686				1,821
		Total Liabilities		893,294				735,876				666,992
Stockholders' Equity
	Common stock, no par value			71,088				70,928				71,879
	Retained earnings			17,503				13,623				7,629
	Accumulated other comprehensive income / (loss)			5,403				894				(1,314	)
		Total Stockholders' Equity		93,994				85,445				78,194
		Total Liabilities and Stockholders' Equity	$	987,288			$	821,321			$	745,186
	*	Derived from audited financial statements

UB Bancorp
Statements of Operations
($000's omitted except per share data)
			For the Three Months Ended						For the Twelve Months Ended
			Dec 31, 2020			Dec 31, 2019			Dec 31, 2020			Dec 31, 2019
			(un-audited)			(un-audited)			(un-audited)			*
Interest Income		$	8,899		$	8,724		$	35,307		$	34,119
Interest Expense			1,019			1,767			5,511			6,962
	Net Interest Income		7,880			6,957			29,796			27,157
Provision for Loan Losses			595			188			5,291			941
	Net Interest Income after Provision for Loan Losses		7,285			6,769			24,505			26,216
Noninterest Income			951			922			3,609			3,316
Noninterest Expense			5,875			5,399			21,987			20,596
	Income Before Income Taxes		2,361			2,292			6,127			8,936
Income Taxes			444			446			1,071			1,777
	Net Income	$	1,917		$	1,846		$	5,056		$	7,159
	Net Income Available Per Basic Common Share	$	0.32		$	0.31		$	0.85		$	1.20
*	Derived from audited financial statements

 

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FAQ

What were UB Bancorp's Q4 2020 earnings results?

UB Bancorp reported a net income of $1.9 million, or $0.32 per common share, for Q4 2020.

How did UB Bancorp's total assets change in 2020?

Total assets increased by 20.2%, reaching $987.3 million as of December 31, 2020.

What is the outlook for UB Bancorp following the pandemic?

While asset quality remains strong, the Company anticipates potential credit deterioration in the future due to economic challenges.

What dividend actions did UB Bancorp take in December 2020?

UB Bancorp paid a cash dividend to shareholders on December 31, 2020, and approved a share repurchase of up to 1.5% of outstanding shares.

What are the key growth metrics for UB Bancorp in 2020?

Core deposits grew by $119.9 million (19.1%), and gross loans increased by $82.7 million (14.3%) in 2020.